Iowa farmer Jeff Ryan gives a look into the wild hay market.
This may or may not come as a news flash to you, but this spring has not been a good one in my corner of farm country. It's like the month of March dragged on for 90 or 120 days. We never warmed up and dried out when the calendar eventually said it was officially spring. The snow didn't want to melt. The temperature didn't want to warm up. Then it kept raining. It stayed cool. It rained some more. Then it snowed. That was in May. And we're not talking a dusting, either. We're talking several inches. In May!
So where does it all lead? Nothing has been done in a timely fashion this year. At least, not in my area. We're now into June and we still have only about 20% of our corn planted and zero soybeans. We're normally done with everything by about the 10th to the 15th of May. We didn't even get started with any fieldwork until mid-May, and that ended up being about a two-day window before more rain returned.
All of the winter weather and frequent wet soils with cold temps combined for some of the most historic winterkill we've ever seen on alfalfa. Alfalfa typically doesn't have much trouble handling winter. If you don't cut it terribly short before the first killing frost of the season, the plants will regrow the following spring. The plant's roots store carbohydrates to generate that regrowth. If you cut the alfalfa before the frost, the root reserves are put toward growth and the plant then has its strength sapped before winter. It more or less starts on an empty tank the next spring. A thick covering of snow during the winter actually helps. That provides plenty of insulation for the plant. It also provides another critical element: air. Even though it's essentially hibernating, the alfalfa plant needs some air movement. If you cut off its air, you can kill the plant. Believe it or not, the plant can "breathe" through a blanket of snow. Ice is a different story. Ice is not good for alfalfa. It cuts off the air supply to the plant. If the ice remains in place on top of the ground for an extended period of time (a couple of days to weeks), it can kill the plant. Hence the name -- winterkill.
All that snow we had this past winter kind of melted when we had a couple of above-freezing days. This being the special tier of counties in Iowa where it never gets as nice as the balance of the state, the temperature got just warm enough to melt the snow but not warm up enough to completely get rid of it. The runoff pooled in parts of the field and then froze. To keep it interesting, we also got a couple of weather events where the rest of the state got liquid precipitation. We got ice. That put ice on top of ice in the hay fields.
That also more or less drove a nail into the coffin lid of a lot of alfalfa fields in northeast Iowa, southeast Minnesota and southwest Wisconsin. What with our scenic topography, we have the kind of land that is well-suited to fields covered with alfalfa instead of corn or soybeans. We also have a lot of livestock operations that use that forage to feed their animals. If you have paid attention to these stories over the years, you may have noticed that I interact with a lot of those very people in my daily life. I find them to be significantly more entertaining than their row-crop brethren. Add in the fact that I can generate some revenue from those interactions and it all works out well for yours truly, thank you very much.
A lot of my fun over the last 15 to 20 years has come from the Fort Atkinson Hay Auction in nearby Fort Atkinson, Iowa. The weekly hay auctions in Fort have been a tremendous source of material for me each Wednesday for a number of years. The auction's original owner, Bob, retired a couple of years ago. That happened at about the same time that a full-time hay broker re-appeared on my radar. He'd bought a load or two from me in the past, but never did a lot of business with me on a consistent basis. He stopped by my place about the same time that Bob retired. His needs and my needs matched up fairly well, so we started doing business together on a bigger scale. That was about the time that the dairy industry went into a serious slump. The hay I had been selling directly to dairy operators wasn't getting paid for in a timely manner. Accounts Receivable were becoming a bit large for me. Next thing you know, the hay jockey was needing hay and writing a decent check for it each time he got a semi load. It has now gotten to the point where he takes about 90% of everything I sell.
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The price of corn and soybeans has been high enough the last couple of years that few farmers are raising hay unless they absolutely need it for their own operation. We like it because it works well in our crop rotation and suits our conservation efforts quite nicely. Being able to produce and sell it successfully helps a lot in that equation. When you combine a shrinking supply with steady demand, the math works better for me. When you add in a sudden supply shock to the system like the extended winter and resulting winterkill problem created, you get something close to a perfect storm. The price of hay has risen a bunch in the last 12 months. Heck, it's doubled from there just in the last few weeks. When I first took hay to Fort Atkinson on a gooseneck trailer behind my truck, my goal was to come home with a check for a thousand bucks. That was a great week. A gooseneck would hold 11 bales. A semi would hold 22 to 25 bales, so the goal there was $2,000.
Ted, my hay jockey, was wanting to know if I had any hay left. He hadn't gotten any from me for a few months. Because of all the snow and ice this winter, every time I'd try to move a bale of hay, the net wrap around it would be frozen to the ground and would tear. You can't get unwrapped hay onto a trailer successfully and expect it to bring decent money. People will pay extra for free-range chicken. They won't do that for free-range hay. Can't say that I'd blame them.
So I decided to wait with my hay. Yeah, the market was strong this winter, but the discount for net wrap explosions wasn't going to work for me. I'd wait and see what the spring brought. Turns out that wasn't a bad idea.
Ted called one day to see if I had anything left. He'd been here last fall to look over my inventory so he'd have an idea of what was available to his customers as they called. I could sense the tension in his voice when he called. I could also sense the tremendous relief when I told him I'd hardly moved a bale all winter. That's when the tension teeter-totter switched back to my side as I tossed out some pie-in-the-sky numbers to him on what it would take to change ownership of my hay. As many G's as I was pulling on that teeter-totter at that moment, everything felt perfectly stable when the response I got was quite favorable. No catapult action. No sudden drops to the ground. We'd found hay equilibrium.
The first semi was loaded and hit the road. The buyer approved of the hay, so another order was placed. Then another. Then another. Then a different customer wanted some. Then another.
In just a few days one week, I sold more hay than what my annual goals used to be. We weren't running around the clock loading trucks, either. It was only a handful of loads. When we got the paperwork together that Saturday at the co-op for the official check-writing ceremony, Ted handed me the check and said it used to take him six months to sell that much hay when he first started doing this 30 years ago or more. I told him it used to take me a few dozen Wednesdays in Fort Atkinson to do the same. Now we did it in less than a day's time worth of loader work.
Then people got out and looked at their alfalfa fields. They started to realize how bad things looked. Then it rained some more. They started talking to Ted about bringing hay in from distant states. Nothing was really left for inventory in those areas that was good enough quality for dairy cattle. The cold spring meant new-crop hay wasn't going to be early this year. Last year was unseasonably warm early on, so a lot of producers got started with their hay harvest early. Then it quit raining last year. Production dropped, but the calendar math didn't change. If you have a 12-month supply of feed and the next year's crop isn't ready until 13 or 14 months later, that makes for some interesting decisions on about day 364 to day 367. All the rain we've had this spring meant new-crop hay wouldn't be available until the ground dried out enough to support the equipment to harvest it.
That's when telephone tension teeter-totter kicked into gear again. Ted called to see if I had anything left. I did and I tossed out some new numbers. (They weren't smaller). More phone calls were made between Ted and the prospective buyers. That's when it got interesting. A call on a Wednesday revealed one buyer was very interested in a load of hay. Oh, by the way, he'd be completely out by the weekend at best, but maybe as early as Friday, so his negotiating strength was a bit limited. We had his bales loaded and ready to head out of my yard around noon that day. That's part of why Ted likes working with me. If you can get him results in short order, you will probably be his first call when he needs something. Exceed his expectations and you're gold.
When he came back for another load later (after yet another emergency call), Ted was telling me about the first buyer and his fairly urgent need. "I got out of the truck in his yard and he more or less ran up and hugged me, Jeff! He didn't think when he called this morning that he'd even be able to find hay, let alone have it in his yard yet that day!"
Another call during that trip revealed that a different buyer had tried the new-crop hay harvesting route. Two problems were discovered. First of all, the ground wasn't as firm as he'd hoped it would be. How shall I put this? Neither was the harvested product, which was his second problem. When really, really green forage like that is fed to cows, let's just say that you didn't want to be standing within about eight or ten ft. of the south end of that cow in a north wind.
That ration needed dry matter. That dry matter needed to be palatable and full of nutrition. Nothing fits the recipe like a nice round bale of alfalfa-grass hay. What a coincidence, I had some of that very stuff!
I had sent a photo to a friend in central Iowa a few weeks before that when we'd loaded some other decent hay. It was my first-ever load of bales that netted me $300 each at the farm. In all of my years of selling hay, it never seemed possible to get $300 out of a bale. My friend and I joked about how my new goal was to get $400 per bale and $10,000 on a load that was still legal on weight.
The truck was being loaded when my mail carrier drove in that day. I thought he may need a signature, so I went over to talk to him as Ted was putting the tie-down straps on the load of hay. (Ted's a professional. We know the rules on strapping your load of hay down, don't we, class?) Because my baler makes a decent bale, they tend to weigh up fairly well. Ted had taken a load last summer that was left over from the previous year's crop. I'd priced it the year before, but no one was interested. So I raised the price considerably last year and had it moved in no time. Ted likes to put two rows of bales across the length of his truck. Then we stack two more rows on top of those. Most truckers only stack a single row on top. That's why they get 22 to 25 bales on a load and Ted gets 30 bales.
Let's just say that Ted was a tad over on his weight goal for that load last summer. And by a tad, I mean just a few, um, tons.
We went easy on this particular load. There were 26 bales on the truck when we called it quits. That would at least show a good-faith effort on Ted's part if he were to encounter anyone with a badge in his travels.
"Overweight? Why, officer, I'm not even full!"
Case dismissed. Carry on.
My mail carrier mentioned how wild the hay market had been lately. I gave him some ballpark numbers on what these bales may bring and he was amazed. Then I mentioned how much I'd receive vs. the end user's ultimate tab. This load still had to travel 100 miles or so and probably would get some margin added by Ted, too. He's not working just for the fun of it.
Ted got the load to the scale in town and did some paperwork. Perhaps it was the acoustics where we were at the moment, but I'm pretty sure I heard slot machine bells and whistles go off when the final check was written.
I have new, upwardly-adjusted goals for hay sales now. You know, in case it turns dry and production falls short this summer. Maybe I should add a time component to the new goals. I'll be the only guy loading hay with a starter's pistol, a stopwatch and a security guard.
Guy No. 2
Jeff Ryan is Guy No. 2 in the operation of Two Guys Farming, Inc., near Cresco, IA.
Jeff farms during the day, but in the evening he e-mails his observations about life on the farm to his city-dwelling friends. He weaves these observations into entertaining stories that are sure to bring recognition, sometimes tears, but mostly a few smiles and outright belly laughs. Read more columns from Jeff Ryan here.